Major works bill deduction

[tomcarlton]

Hello!

I'm doing my first self assessment this year. I first let my property in May 2017, having paid a big bill for major external works late in 2014. These works were officially completed in May 2017, confirmed by the administration company, and are meant to be done every 7 years.

Based on this, am I allow to deduct to total bill of for the works during this tax year 2016-17 since the works were completed during the lease period? Should I instead deduct the proportional yearly amount since the amount should cover a 7 year period?

What about deducing buy to let mortgage product fee and/or exit fee of the previous mortgage to get that buy to let? Since they are cost I had to incur to let the property, can they be deducted?

Many thanks!

[leaseholder64]

I would have thought the claim for the service charge should have been against 2014/15.

[JK0]

If your business income is under £15k, I believe you don't need to apportion over a number of years, and can just put it down in the year of the invoice date.

[leaseholder64]

If your business income is under £15k, I believe you don't need to apportion over a number of years, and can just put it down in the year of the invoice date.

Could you give some keywords for further research on this. I'm not a property investor, myself, but rentals in my block are around £1,200 - £1.300 pcm, so on the border of £15k p.a., and I'm pretty sure some landlords have portfolios. This seems to imply the need for a level of detail on the service charges that isn't currently reliably being provided, but I haven't heard any rumours of sub-landlords complaining because they cannot complete their tax returns. I imagine they are just allowing the billed service charge against tax. (I would have thought tax problems would have got them interested.)

[JK0]

It's the cash basis versus accruals basis. I did read recently that they were going to put the threshold up to £85k.

[jpkeates]

I'm doing my first self assessment this year. I first let my property in May 2017, having paid a big bill for major external works late in 2014. These works were officially completed in May 2017, confirmed by the administration company, and are meant to be done every 7 years.

If your business began this year, you are going to struggle with any costs being backdated.

Costs can be backdated, but the business has to exist.

[leaseholder64]

It's the cash basis versus accruals basis. I did read recently that they were going to put the threshold up to £85k.

How do you reconcile the payer only bringing the money into account when the money is spent on works with ICAEW TECH 03/11, which clearly shows the money as income, to the trust, when the money is due for payment, not when the work is done? Surely the same money should either be included on the accoutns for both sides, or excluded for both sides?

Also, it is my understanding that conveyancers will pro-rata the actual service charge money for the current year, but will not treat the value of any sinking fund as being returnable to the seller. Of course, the sinking fund should have an impact on the capital value, but that is simply reflected in the asking price, so would normally appears as part of a capital, rather than a revenue, item..

Note my practical experience on the latter point is about 30 years old, and I bought very close to the end of the financial year, so the seller essentially got to pay the full yearly contribution. However there was definitely no adjustment for the sinking fund..

If expenditure only qualifies for tax when the resulting work is done, what happens if you sell when the sinking fund has been building up for five or more years?

As I say, I'm not a property investor, so this doesn't directly affect me, but my lessor has never issued the annual statements that would make the position clearer, and has become erratic with account summaries, but, whilst they have other complaints, I've never heard of the leaseholders who are investors screaming for this information to complete their tax returns.

To the OP: I've assumed this is a residential property, but you don't actually say.

[JK0]

How do you reconcile the payer only bringing the money into account when the money is spent on works with ICAEW TECH 03/11

No idea, I'm afraid. I leave it to my accountant.

[Gordon999]

If your first let started in May 2017, you can only claim service charge payment apportioned from May 2017 onwards. You cannot claim cost of service charge paid in 2014 for building external decoration before the commencement date of your letting business .

But you should consult a tax accountant on how to prepare your 2017-2018 tax return.next year.